THE INVESTMENT COLUMN : St Ives spends its way to profits

St Ives stands as a testament to the virtues of investment. While most rivals were constrained by recession or debt, Britain's leading printer has pumped £100m into its business in the past five years. That has maintained profits through the dog years of the early 1990s and is allowing the group to lever margins on the back of the revival in its main markets of magazines and books.

Latest figures announced yesterday showed the underlying net margin has advanced from 10.3 to 12.3 per cent in the six months to January. That was good for a 31 per cent rise in pre-tax profits to £15.7m, after disregarding the £4.9m goodwill write-off on disposals in the comparable period, and was achieved on a mere 9 per cent gain in sales to £128m.

Admittedly, St Ives got a big boost from the turnround in its US operations, where a better product mix and higher efficiency reversed a £118,000 loss into profits of £870,000. But the group's ex-merchant banker chairman, Miles Emley, says all divisions contributed to the increase, except financial printing. St Ives is the market leader in printing annual reports for quoted companies, but the dearth of bids and deals in the City meant its Burrups subsidiary had fewer weighty offer documents to print, which left divisional profits flat.

In magazines, where the group commands about 20 per cent of the market for web-offset printing, Mr Emley said they had seen the busiest autumn for some time and there was also a strong performance in hardback books.

The increased volumes helped capacity utilisation rise by "a modest single- figure" percentage to somewhat over 80 per cent, boosting margins in the process. They should be kept moving ahead by new plant due to come into production from this autumn, which will also raise capacity by up to 15 per cent.

In all, St Ives plans to spend between £65m and £70m over the rest of this year and next. But even that hefty capital expenditure budget may not make much more than a dent in the group's cash balances, which stood at £35.5m in January, given the strong cash flow.

Mr Emley continues his lengthy search for acquisitions, with Europe and the US both possible target areas, but he retains a healthy distaste for overpaying. In the meantime, shareholders should be pacified with the 32 per cent rise in the interim dividend, even if part of the increase represents a rebalancing with the final, and likely further progress towards the company's target of regaining its peak margins of 15 per cent in the 1980s. Full-year profits of over £32m would put the shares, up 13p to 362p, on a forward multiple of about 16. Reasonable value.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
News
General Election
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Ashdown Group: Head of Client Services - City of London, Old Street

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders